Manufacturing, Housing Data Beat Expectations
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Saturday, April 25, 2009
Demand for manufactured goods and new homes, while weak in March, was better than expected, according to government data released yesterday, raising hopes yet again that the economy's deterioration could be slowing.
"The economy is probably not out of the recession yet, but we're certainly stabilizing. There is no doubt about that," said Michael T. Darda, chief economist for MKM Partners.
The economic data helped prop up stocks yesterday. The blue-chip Dow Jones industrial average was up 1.5 percent, or 119.23 points, to close at 8076.29, while the broader Standard & Poor's 500-stock index gained 1.7 percent, or 14.31 points, to 866.23. The tech-heavy Nasdaq composite index climbed 2.5 percent, or 42.08 points, to 1694.29.
But after a few days of rocky trading, the Dow and S&P were down slightly for the week, less than 1 percent, breaking a six-week winning streak. The Nasdaq was up 1.3 percent for the week.
Investors have been looking for signs that the economy's rapid descent is easing. That was reinforced yesterday after the Commerce Department said orders for durable goods fell 0.8 percent in March.
Analysts had been prepared for worse, so in that sense, the relatively modest drop last month was good news. Indeed, nondefense new orders for capital goods, which many analysts use as a proxy for business investment, actually increased 1.9 percent.
"You can read into these numbers that the rate of descent is tapering off," said Stuart G. Hoffman, chief economist of PNC Financial. But the rate of orders still "implies to me that heavy industry and capital spending are going to be down for the next two or three quarters."
There were also signs of stability in the new housing data. After surging in February, new-home sales declined 0.6 percent to an annual rate of 356,000 in March. That was better than analysts expected. Sales fell the most in the Northeast, 32 percent, but were unchanged in the South, which includes the Washington area.
The main problem facing the housing market now, analysts said, is a bursting inventory, which will continue to drag down prices into next year. Median new-home prices fell to $201,400 in March, down 12 percent from a year earlier. The current 10.7 month supply of new homes on the market, down from a 11.2 month supply in February, could fall by half before prices start to stabilize, analysts said.
